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Appraiser versus Lender Valuations

We have an offer that has been accepted on a property. The appraiser issued their report. However, it was immediately flagged by the lender. Their internal review generated a value that was $225k less than the appraisers report. Admittedly, this is a difficult property to appraise since the lots size, house sq ft, and overall status create different opinions. This has happened 2x now with 2 separate Lender/Appraise teams. We are not in a position to bridge this gap with cash. Are there other financing alternatives we can/should pursue? Is there a way to "force" the lender and appraiser to align on a valuation? Thanks! T-
  • October 19 2012 - San Rafael
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Answers (4)

The 2 appraisal reports and our offer do all "align" (literally to the dollar - which is incredibly coincidental in my opinion).

For complex properties, which yours seems, values can never be so exact, there will always be a 'window' where  values fall. When that happens in a PURCHASE situation, the appraiser oftens times see if the purchase price is within that window and appraises it there. No appraiser is so good as to exactly nail a value to the dollar for a complex property in your (presumed) price range.  If they could yes it would be different than the purchase price.
Non-complex properties, sometimes, complex properties, no. Strictly due to the amount of hard data.

For the type of property you are speaking of, youll get 10 opinoins with 10 appraisals, so dont assume anything about appraisals, especially these days. 

Good luck !
  • October 20 2012
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Profile picture for user5292948
Thanks Vince.

This is a conventional loan on a Single-Family residence.

The 1st team of appraiser/lender did meet.  However, since the valuation was so far apart ($225k variance), they could not reconile the gap.  The lender decided it was "too hard" (read:  too risky) for them to move forward.

The 2nd team of appraiser/lender had similar results.  The lender took one look at the appraisal report and said "not even close".

The 2 appraisal reports and our offer do all "align" (literally to the dollar - which is incredibly coincidental in my opinion).  However, we expected our offer was on the "high side" and expected the appraisal to come in lower.  We had planned on this being the catalyst for us to adjust the price with the seller.  Instead, the appraisers are both saying "yep price looks good" and the Lender's are saying "no way".  I'm no appraiser, but do work a lot with numbers. Even I have been able to shoot holes in the appraisal reports.

We may wind up back with the Seller and an adjusted price (not sure how receptive they will be).  I was hoping to find an alternative solution to put on the table also.  Owner financing is one option which we can discuss.

Are there other ways to structure this deal?

Thanks!
  • October 20 2012
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 Is there a way to "force" the lender and appraiser to align on a valuation?

The purpose of the appraisal is to tell the lender what the property would sell for if they took it back.

If their 'interanl review' or review appraisal was less, then the values should be reconciled somehow inhouse. Reviews dont typically involve on-site inspections, but they are used to double check the value of the appraisal, and typically are the same.

Im not sure what TYPE of property you are talking about - commercial, land only, industrial, nor the price range. A little more info would help.

I would move on to lender #3 and/or simply negotiate price with the seller.
Seems like you want the property more than the seller wants to sell....
  • October 20 2012
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Profile picture for StuartSantana
No way to force them...banks are a bit conservative these days. Just keep trying, challenge the value, etc. Eventually the stars willl align or the seller will come down in price. If the asset is paid off maybe the selllet should consider carrying the note. Best wishes from So-Cal
  • October 19 2012
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